The Classical (Ricardo-Torrens) Theory of Comparative Costs

Giancarlo Gandolfo

Chapter Chapter 2 in International Trade Theory and Policy, 2014, pp 11-31 from Springer

Abstract: Abstract The demonstration by David Ricardo that two countries producing the same two commodities might profitably trade with each other even if one was superior to the other (i.e., had lower production costs) in the production of both commodities came as a surprise to the economists of the time, accustomed to reason in terms of absolute costs. This chapter gives an exhaustive explanation of the theory of comparative costs, including its modern interpretation in terms of optimization.

Keywords: International Trade; Unit Cost; Real Income; Comparative Cost; Transformation Curve (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sptchp:978-3-642-37314-5_2

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DOI: 10.1007/978-3-642-37314-5_2

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